Low income American families continue to struggle under an unfair tax code that skews toward the rich. Recent tax changes give an annual average cut of over $100,000 to Americans with incomes over $1 million, while middle-income families with incomes between $26,000 and $45,000 receive about $650, and low-income families even less. These tax changes exacerbate existing inequalities and slow the economy.

Americans overwhelmingly cited the economy as one of their top motivations in voting during the midterm elections. Congress must take note and make amending the tax code a top priority when it starts its new session in January. Expanding the Child Tax Credit and Earned Income Tax Credit would bring immediate relief to workers and working families.

The Child Tax Credit is currently limited for low income families who have smaller federal income tax liabilities. Yet many low income families still have significant payroll tax liabilities—over 95 percent of Americans in the bottom 20 percent of the population pay more in payroll tax than in federal income tax. Congress should therefore make the Child Tax Credit available to more low income families by making the credit refundable to all families with payroll tax liability.

Congress should also improve the Earned Income Tax Credit by reducing the marriage penalty that can cause over half of low-income married couples to have lower benefits. It should also triple the small EITC for childless workers in order to increase employment among disadvantaged young adults. This change would benefit about four million people, yielding an average tax savings of about $750 annually.

Congress can further benefit working families by creating an additional credit for families with three or more children. The EITC currently increases for one and two children, but not for three or more. This would benefit about 3 million low income families.

Americans today overwhelmingly believe that the tax system is unfair and overly complicated. Six out of ten Americans from all age, income, and education groups believe that the tax code is unfair. Seven out of ten Americans believe that the tax code is too complicated. The new Congress must heed the call for change this January. These Child Tax Credit and Earned Income Tax Credit changes are a strong start to making the economy fairer and easier for all Americans.

For more information, see:

  • Reform the Tax Code to Reward Hard Work—Not Just Wealth
  • The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.